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Political favoritism

Aaron Task recently interviewed Richard Suttmeier, chief market strategist at Niagra International Capital.

Richard believes that “the single most important leading indicator for the U.S. economy” is not the monthly jobs report, but the FDIC quarterly banking profile.

He likens this report to a huge balance sheet of the U.S. financial system and overall economy.

After looking at the most recent report, Richard says the banking system “is not as good as Wall Street is saying.”

Well, yeah, that’s pretty darn obvious.

Richard points out that the largest banks got bailed out with free money, while all the other banks got no help at all.

He reports that 4,100 out of the approximately 8,000 banks have 80% of their funds “out there” versus loan commitments.

In more normal times that number should be around 60%.

Here’s what it means: banks are vastly winding down their future lending. They are not making new loan commitments, they are simply fulfilling previous loan obligations.

He calls it the loan pipeline: “You want to have money coming in, and money going out.”

The problem is that banks are massively shrinking that loan pipeline. Most of the banks’ money is out, and there is not much in the way of new loan commitments in the pipeline for the future.

Thus the ratio is up over 80%.

This is very, very ominous for the economy as a whole.

Richard says, “When you have all loan types declining, while the economy is going up, something’s not right.”

Aaron agrees with him, and so do I.

What’s not right is the economic statistics being released by the government. The economic numbers being reported have been adjusted, massaged, and sugar-coated to such a degree that they now lack any real world credibility whatsoever.

In the real world, the economy continues to erode. In the world of government fantasy statistics, the economy is growing rapidly.

Fantasy statistics do not pay the real world bills.

Richard ends the interview by saying, “We have to find funding for the smaller banks, and I think that’s TARP, but not to individual banks because all that is, is political favoritism.”

It will be a much, much better world when the flow of trillions of dollars in “political favoritism” is brought to an end, and completely prevented from occurring in the future.

But don’t hold your breath waiting for that to happen.

Harry the Whistle Blower

Christine Romans of CNN recently interviewed Harry Markopolos.

Harry has some very strong accusations to make. Among them, he states that the S.E.C. works to protect Wall Street, not investors.

He comes right out and says that “the regulators are working for the bad guys, the captains of the industry.”

He says, “They should be protecting investors and bank depositors, but they’re not. They’re representing the bank CEOs, they’re representing the Wall Street titans, and they’re not doing their jobs for us.”

Who is Harry Markopolos and why should we believe him?

Harry is the forensic accounting specialist who repeatedly delivered evidence to the S.E.C. claiming Bernie Madoff was a fraud.

There is no question in my mind that Harry’s claims are correct. The regulators are working on behalf of, and protecting, the guilty.

The financial crisis that started in 2008 has not been solved, it has merely been covered up so that the titans of Wall Street can continue to do what they have been doing.

That’s a giant problem. Our financial system is technically insolvent because of their misdeeds, and instead of prosecuting the guilty, and repairing the damage to our financial system, the regulators are protecting them.

This means that the financial system is going to continue to deteriorate, and that is exactly what is happening.

Since the regulators are working for those people who are causing it, the public is not being told what is really going on.

The public will not be told until it all comes crashing down again.

But Harry will tell you what’s really going on, and so will I.

You simply must protect yourself from the coming catastrophe.

2,988 community banks are in trouble

Elizabeth Warren, chair of the TARP Congressional Oversight Panel, has been quite forthright in her description of the financial crisis that we are in.`

She does not believe that the financial crisis is over. On the contrary, just in the past week she was part of a group of economists who are warning of an even greater financial crisis than the one we went through in 2008. They describe this current situation a “doomsday cycle.”

You can read that story here:
http://abcnews.go.com/Business/economists-warn-financial-us-economy/story?id=9990828

As chair of the Congressional Oversight Panel, she is warning that 2,988 community banks are in trouble.

The opening paragraphs of the panel’s report includes the stern warning that “a significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American. When commercial properties fail, it creates a downward spiral of economic contraction: job losses, deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities. Because community banks play a critical role in financing the small businesses that could help the American economy create new jobs, their widespread failure could disrupt local communities, undermine the economic recovery and extend an already painful recession.”

I agree with her that we are in a serious financial crisis. I agree with her that there are multiple negative feedback loops that are dragging the economy down.

Where I disagree with her is when she states that we need to get in front of the banking problem.

Here’s the truth: the losses are already in the system. If 2,988 banks made high risk loans and now those loans are going to cause the banks to fail, that’s life.

That may sound cruel and cold, but it is not meant to be so. The losses are in those banks. We can’t wave a magic wand and make the losses instantly disappear.

The losses are already there!

When she says “get in front of the problem,” she is saying that we need to “do something” to prevent the negative feedback loops from happening.

It’s too late for that! The losses are already there! They have to be dealt with, one way or another.

The only thing we can do at this point is to determine who will pay for those losses.

I strongly believe that we should let the free market function properly. Let the insolvent firms go bankrupt. Better yet, force the insolvent firms into bankruptcy and prosecute all instances of financial fraud.

Our government has chosen not to do that because too many of the politician’s esteemed friends and contributors would suffer financially.

Instead, you and I are forced to pay for the bankers losses.

Let them eat their own losses!

Unfortunately, that has not happened, nor do I see it happening any time in the immediate future. Instead, you and I are going to be forced into paying for even more bank losses.

Here’s the problem: we simply can’t afford to pay for all the banks’ losses. So where will the money come from in order to continue to support all those poor bankers?

Printed out of thin air.

That’s what has been happening, and if you pay close attention to what Elizabeth Warren is saying, that is what will need to continue to happen.

You need to protect yourself from all the money printing going on.

Walking hand in hand with Greece

David Walker, a former U.S. comptroller general, recently talked with Bloomberg’s Peter Cook about the U.S. fiscal condition.

He starts out by saying, “But frankly, we’re on the same path as Greece… you can’t spend more money than you make, and make promises you can’t keep forever, without having serious adverse consequences.”

In case you’re not aware, Greece is teetering on the edge of sovereign default and the country needs a bailout.

David says that the U.S. is on the same path as Greece, but he believes we have plenty of time to get our house in order, so to speak.

when listening to him speak in the video, you’ll see he puts a great deal of faith into the new debt commission that President Obama has just created.

Oh, please!

That’s the oldest political trick in the book. When you don’t want to take any action, but you want to appear like you’re taking action, appoint a commission. That way you can appear all concerned and you have something “solid” that you can point to in order to claim you’re making progress on an issue.

Faith in a commission actually solving the debt problem? You’ve got to be kidding.

I have absolutely no faith that any results will come from the debt commission. None. Zip. Nada. Zero.

So where does that leave us? On the same path as Greece.

The U.S. is spending more than it can tax as well as more than it can borrow. The Fed is now buying U.S. debt in order to make it look like there is sufficient demand.

There isn’t.

Nor is there a country big enough to bail out the United States.

Those adverse consequences that David mentioned are already arriving in the form of currency debasement. It is only a matter of time for that debasement to result in rapidly rising prices.

You can put your faith in a politically created commission, or you can take personal action to protect yourself.

Inflation or deflation?

On Friday I shared a video with you of Robert Prechter, president of Elliot Wave International.

Mr. Prechter is forecasting deflation due to shrinking credit and debt default.

I agree that credit is shrinking and that this is a deflationary force. However, and this is a very big point that shouldn’t be overlooked, the Federal Reserve is engaged in quantitative easing, meaning they are printing money our of thin air.

That is highly inflationary.

The Fed is printing more dollars into existence than are being taken out of existence due to shrinking overall credit. The speaker in today’s video wisely points out that fact.

This is pure currency debasement. The protection against such actions is to place your money into a currency that isn’t being debased.

Nearly all fiat currencies are, so that only leaves precious metals.

Peter Boockvar is worried about coming “inflation.”

I, too, am worried about rapidly rising prices as a result of currency debasement.

However, the proper definition of inflation is not rising prices. The financial media looks at the consumer price index and if it is up, reports that as inflation.

This is highly deceptive and incorrect. It confuses cause with effect.

Inflation is the creation of money in excess of natural GDP growth.

That debases the currency, and thus it takes more of the devalued money to buy the same amount of goods or services.

It’s not that prices are going up, it’s that the value of the money used to make the purchase is going down.

Inflation happens as soon as the money is debased. However, there is a time lag of months before the full impact is felt.

The minute that the Fed creates more money and debases the value of the dollar, prices across the board don’t instantly rise. It takes time for that additional money to work it’s way into the economy and to dilute the value of the existing money.

Of course the Fed and the government try as much as possible to hide the negative effects of currency debasement.

They want the public to believe that currency debasement is not taking place.

But it is, and you need to protect yourself.

Better to have gold than to suffer the consequences of Fed actions.

Prechter is wrong on precious metals. Boockvar is correct on currency debasement.

Got Gold??

Today I’d like to share a video with you of Robert Prechter, president of Elliot Wave International.

Now, I don’t agree with everything that Mr. Prechter forecasts.

He is forecasting deflation due to shrinking credit and debt default.

I agree that credit is shrinking and that this is a deflationary force. However, and this is a very big point that shouldn’t be overlooked, the Federal Reserve is engaged in quantitative easing, meaning they are printing money our of thin air.

That is highly inflationary.

The Fed is printing more dollars into existence than are being taken out of existence due to shrinking overall credit.

This is pure currency debasement. The protection against such actions is to place your money into a currency that isn’t being debased.

Nearly all fiat currencies are, so that only leaves precious metals.

Mr. Prechter has been bearish on precious metals for the past decade.

I’ve been of the opposite opinion for reasons above and have been accumulating physical precious metals for the past decade.

I am still accumulating, and Prechter is still of the opinion that “gold is way overpriced.”

I couldn’t disagree more. I know that gold is way underpriced.

One of the interviewers actually points out that Prechter has been forecasting deflation since 1987.

That’s an extremely long time to hold a view that is 100% wrong!

We haven’t had a year of falling prices in the last 22 years, yet for that entire time Mr. Prechter has been calling for deflation.

Remember that when you listen to his forecast of a falling gold price.

What I do agree with Mr. Prechter on is his direction for the stock market.

However, I have seen charts of his forecast. He is calling for the DOW to fall below 1,000.

I am not. I believe that just like Zimbabwe, stock prices will be elevated by the declining value of the currency.

I agree that the DOW would fall below 1,000 IF the Fed wasn’t debasing the Dollar to the extent they are.

My forecast is for the DOW to bottom well above 1,000. When the stock market really develops selling pressure and prices are falling rapidly, I think we will see more of the same from the Fed: rapidly printing money.

That’s destructive to not only the value of the Dollar, but to the economy as a whole.

Better to have gold than to suffer the consequences of Fed actions.

Prechter is wrong on precious metals.

Got gold?

The Policy of a Slow Motion Disaster

This morning the Labor Department released statistics showing that the initial jobless applications rose by 22,000 to 496,000 in the week ended Feb. 20, the highest level in three months.

The stock market opened sharply lower today on that piece of very discouraging news.

Zero Hedge reported early this afternoon that $9 Billion worth of SP500 futures were traded within 10 minutes.

Of course, that amount of money thrown at the market in a ten minute time period is going to move market prices dramatically higher.

After being down over 19 points this morning, the SP500 closed down a little more than just 2 points.

There is little doubt that quantitative easing by the Federal Reserve is playing a role in moves like this.

The average American wouldn’t see any problem with this. He’d just assume that it is good for the country and that as long as the stock market is going higher, all is well.

Unfortunately, that viewpoint is totally incorrect.

This policy of the Fed’s is currently a slow motion disaster, but at some point it will become a very fast moving disaster.

Here’s the truth: nobody can print their way to prosperity. That applies to individuals, banking cartels, and nations.

It’s been tried over and over again throughout history, and it has never once worked. It has a perfect track record of failure.

Printing money out of thin air = currency debasement = inflation = lower standard of living.

The more “money” that is printed = the more debasement = the higher the inflation rate = the lower the standard of living.

The Fed’s printing of money is causing tremendous harm to the value of the dollar.

Not only is quantitative easing NOT solving our problems, it is making them worse, albeit with a time delay.

This time delay between current actions and future consequences fools many people.

Creating money today does not equal instant higher prices for everything we buy. There is a time delay, but much, much higher inflation is in our future based upon the actions that the Fed has already undertaken.

If the Fed doesn’t stop, hyper-inflation will also be in our future.

In today’s video, Marc Faber says it clear: inflation is coming.

It’s not difficult to see why. If one wants to learn the lessons of centuries of financial history, it’s easy to see the past results of currency debasement.

I disagree with Dr. Faber on one point, however. He states that gold, farmland, commodities, and equities are good places to have your money in light of what the Federal Reserve is doing.

Zimbabwe went through several years of incredible hyperinflation recently. At one point, their stock market was the best performing in the world, when you take into account just price changes unadjusted for loss of purchasing power.

But when you factor in the loss of purchasing power, by placing money in stocks through that period of hyperinflation, investors still lost nearly 90% of their purchasing power, even though their stock portfolios showed large gains.

Yes, the stock prices went up dramatically, but prices of everyday goods went up even more dramatically.

The stock market didn’t shield anyone from the loss of purchasing power in Zimbabwe’s hyperinflation, and it will not in the United States, either.

Precious metals will.

The Worst Housing Sales in History & The Great “Recovery” Lie

Today the news was announced by the Commerce Department that new home sales in January plummeted to record lows.

At an annual sales rate of just 309,000 unites, this is the WORST NUMBER EVER in the records that go back nearly fifty years.

Put another way, we’ve never seen as low a number for new home sales in the history of this country.

Of course, when the Pilgrims first arrived I can assure you that in those years there were less than 309,000 annual housing units sold.

The Commerce Department has only been keeping records of the number of new homes sold for the last half century. Before that, records were not kept.

Nonetheless, today’s number is absolutely horrible: It’s the worst ever!

How the media can report this shocking number and then go on to talk about the housing recovery in the same article is beyond me.

The so-called recovery is a giant LIE. The facts prove it. Recovery means the numbers are improving, not getting worse.

Ignore the hype and outright lies about an economic “recovery.” The only thing that has recovered is the giant bonuses received by the Wall Street Insiders.

Back in the real world, the numbers show that the economy is beginning to accelerate to the downside. That’s not a recovery.

You’d do well to prepare accordingly.

Have a great day!

Too “Smart” to Fail??

Today I have part two of the video I shared yesterday regarding Goldman Sachs.

Not only are they operating above and outside the reach of the law, they are getting rewarded for doing so.

Not only are they breaking the law through front running, fraud, and other methods, they are receiving billions and billions of dollars at the same time.

No wonder they appear so “smart.”

Please don’t confuse making a lot of money with being “smart.”

Al Capone made a lot of money. Allen Stanford made a lot of money. Bernie Madoff made a lot of money.

But they made it by breaking the law.

It’s easy to make a lot of money when you break the law, but that doesn’t prove you are “smart.”

You may look smart, especially if the cops protect you instead of arrest you, but in my book, you’re definitely not smart. Crooked is a better description.

Goldman Sachs claims to be super smart. They claim to be super talented. They claim to be the best of the best on Wall Street.

The truth is, as is stated in today’s video, is that Goldman Sachs would have been out of business if it weren’t for the billions in bailout money they received.

They paint themselves as super smart; what they really are is super corrupt.

Just because they are not prosecuted by the SEC because of the good-ole-boy-network they have between the two doesn’t make them any less corrupt.

While they continue to break the law and get rewarded for it, the average American continues to suffer for it.

In order to get back to a healthy, vibrant economy and financial system, we need to eliminate the rampant corruption.

The place to start would be with Goldman Sachs.

Have a great day!

Goldman Sachs and even MORE financial fraud

I have a video that I’d like to share with you today regarding the method that Goldman Sachs uses to “earn” money.

If you listen to the CEO, Lloyd Blankfein, they are doing “God’s work” and are a tremendous benefit to the economy.

When you actually dig into the facts, however, you see the exact opposite.

Today’s video is part one, and it is a polite presentation of the questions surrounding the methods that Goldman Sachs uses to make money.

Matt Taibbi of The Rolling Stone, describes those methods in a much, much less polite way. A few months ago he wrote an article about Goldman Sachs and their actions. He has written another lengthy article on the topic of the methods they use to “earn” money.

The position of Goldman Sachs is that they are dealing with “sophisticated” investors, and that they should do their own research into the financial instruments that are being sold by Goldman.

This is like saying, “It’s your fault that your car was stolen, you were beaten, robbed, and left for dead because you should have known better than to enter a bad neighborhood.”

Well, maybe you should have known better than to risk going into a neighborhood that historically has had a high level of crime.

Nonetheless, crime is crime. Just because you went into that neighborhood does not dismiss the people who robbed you from answering to the law for the crimes they committed against you.

But that is exactly the position that Goldman Sachs is taking.

There is no question that they are front running. That is a crime.

There is no question that they mis-represented the packages and bundles of financial instruments that they sold to investors. That is fraud, and fraud is a crime.

Saying that Goldman shouldn’t be held responsible for their crimes because they sold to investors that should have known better is like saying that the thieves who beat and robbed you shouldn’t be held responsible for their crimes because you should have known better than to enter that neighborhood.

I just don’t accept that line of reasoning.

Call me old-fashioned if you want, but I believe that criminals should be prosecuted for their crimes, even if they wear $5,000 suits and are friends with the Treasury and Federal Reserve.

After watching the video, I think you’ll get a much better perspective of how Goldman really operates by reading Matt’s latest article. I must warn you, Matt uses very foul language. Even so, the points he makes are valid.

Here is the link to Matt’s article:
http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/1

Here is the video

Have a great day!